Equibles

10-Q

NORWOOD FINANCIAL CORP (NWFL)

10-Q 2025-08-08 For: 2025-06-30
View Original
Added on April 06, 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 0-28364

Norwood Financial Corp

(Exact name of registrant as specified in its charter)

Pennsylvania 23-2828306
(State or other jurisdiction of<br><br>incorporation or organization) (I.R.S. employer<br><br>identification no.)
717 Main Street, Honesdale, Pennsylvania 18431
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (570) 253-1455

N/A

Former name, former address and former fiscal year, if changed since last report.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading<br><br>symbol(s) Name of each exchange<br><br>on which registered
Common Stock, par value $0.10 per share NWFL The Nasdaq Stock Market LLC

Indicate by check (x) whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    ☐  Yes    ☒  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class Outstanding as of August 1, 2025
Common stock, par value $0.10 per share 9,261,575

NORWOOD FINANCIAL CORP

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2025

Page<br><br>Number
PART I - CONSOLIDATED FINANCIAL INFORMATION OF NORWOOD FINANCIAL CORP 3
Item 1. Financial Statements (unaudited) 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
Item 3. Quantitative and Qualitative Disclosures about Market Risk 50
Item 4. Controls and Procedures 52
PART II - OTHER INFORMATION 53
Item 1. Legal Proceedings 53
Item 1A. Risk Factors 53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 53
Item 3. Defaults Upon Senior Securities 54
Item 4. Mine Safety Disclosures 54
Item 5. Other Information 53
Item 6. Exhibits 55
Signatures 56

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2

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

NORWOOD FINANCIAL CORP

Consolidated Balance Sheets (unaudited)

(dollars in thousands, except share and per share data)

December 31,
2024
ASSETS
Cash and due from banks 32,052 $ 27,562
Interest-bearing deposits with banks 20,993 44,777
Cash and cash equivalents 53,045 72,339
Securities available for sale, at fair value (net of allowance for credit losses of 0) 402,460 397,846
Loans receivable (net of allowance for credit losses of 20,908 and 19,843) 1,769,666 1,693,795
Regulatory stock, at cost 7,538 13,366
Bank premises and equipment, net 21,608 19,657
Bank owned life insurance 46,099 46,657
Accrued interest receivable 8,642 8,466
Deferred tax assets, net 17,693 17,696
Goodwill 29,266 29,266
Other intangibles 121 152
Other assets 9,212 18,222
TOTAL ASSETS 2,365,350 $ 2,317,462
LIABILITIES
Deposits:
Non-interest bearing demand 406,358 $ 381,479
Interest-bearing 1,591,476 1,477,684
Total deposits 1,997,834 1,859,163
Short-term borrowings 26,500 113,069
Other borrowings 85,350 101,793
Accrued interest payable 10,975 12,615
Other liabilities 19,266 17,314
TOTAL LIABILITIES 2,139,925 2,103,954
STOCKHOLDERS’ EQUITY
Preferred stock, no par value per share,
authorized: 5,000,000 shares; issued: none — —
Common stock, 0.10 par value per share,
authorized: 20,000,000 shares,
issued: 2025: 9,490,505 shares, 2024: 9,487,068 shares 949 949
Surplus 126,990 126,514
Retained earnings 131,199 124,963
Treasury stock at cost: 2025: 229,983 shares; 2024: 214,161 shares (6,208) (5,797)
Accumulated other comprehensive loss (27,505) (33,121)
TOTAL STOCKHOLDERS’ EQUITY 225,425 213,508
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 2,365,350 $ 2,317,462

All values are in US Dollars.

See accompanying notes to the unaudited consolidated financial statements.  ‎

3

NORWOOD FINANCIAL CORP

Consolidated Statements of Income (unaudited)

(dollars in thousan ds, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
INTEREST INCOME
Loans receivable, including fees $ 27,115 $ 24,121 $ 53,103 $ 47,802
Securities 3,871 2,584 7,742 5,109
Interest bearing deposits with other banks 220 966 446 1,697
Total interest income 31,206 27,671 61,291 54,608
INTEREST EXPENSE
Deposits 10,869 10,687 21,617 20,796
Short-term borrowings 211 356 669 692
Other borrowings 1,061 1,703 2,082 3,485
Total interest expense 12,141 12,746 24,368 24,973
NET INTEREST INCOME 19,065 14,925 36,923 29,635
PROVISION FOR (RELEASE OF) CREDIT LOSSES
Provision for (release of) credit losses 841 297 1,764 (328)
Provision for off balance sheet commitments 109 50 43 52
Total provision for (release of) credit losses 950 347 1,807 (276)
NET INTEREST INCOME AFTER
PROVISION FOR (RELEASE OF) CREDIT LOSSES 18,115 14,578 35,116 29,911
OTHER INCOME
Service charges and fees 1,514 1,504 3,027 2,847
Income from fiduciary activities 226 225 551 463
Gains on sales of loans, net 65 36 112 42
Earnings and proceeds on bank owned life insurance 266 253 552 520
Other 177 189 357 341
Total other income 2,248 2,207 4,599 4,213
OTHER EXPENSES
Salaries and employee benefits 6,605 5,954 13,077 12,090
Occupancy, furniture & equipment, net 1,349 1,229 2,727 2,489
Data processing and related operations 1,189 1,024 2,274 2,046
Taxes, other than income 192 179 385 272
Professional fees 623 508 1,282 1,092
Federal Deposit Insurance Corporation insurance 355 309 761 670
Foreclosed real estate 137 15 141 36
Amortization of intangibles 15 19 30 38
Other 2,066 2,207 3,918 4,442
Total other expenses 12,531 11,444 24,595 23,175
INCOME BEFORE INCOME TAXES 7,832 5,341 15,120 10,949
INCOME TAX EXPENSE 1,627 1,128 3,142 2,303
NET INCOME $ 6,205 $ 4,213 $ 11,978 $ 8,646
BASIC EARNINGS PER SHARE $ 0.67 $ 0.52 $ 1.30 $ 1.07
DILUTED EARNINGS PER SHARE $ 0.67 $ 0.52 $ 1.30 $ 1.07

See accompanying notes to the unaudited consolidated financial statements.

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4

NORWOOD FINANCIAL CORP

Consolidated Statements of Comprehensive Income (unaudited)

(dollars in thousands)

Three Months Ended
June 30,
2025 2024
Net income $ 6,205 $ 4,213
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding gains (losses) 1,492 (533)
Tax effect (313) 113
Other comprehensive income (loss) 1,179 (420)
Comprehensive Income $ 7,384 $ 3,793
Six Months Ended
--- --- --- --- ---
June 30,
2025 2024
Net income $ 11,978 $ 8,646
Other comprehensive income (loss)
Investment securities available for sale:
Unrealized holding (loss) gain 7,108 (3,129)
Tax effect (1,492) 658
Other comprehensive income (loss) 5,616 (2,471)
Comprehensive Income $ 17,594 $ 6,175

See accompanying notes to the unaudited consolidated financial statements.

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5

NORWOOD FINANCIAL CORP

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Six Months Ended June 30, 2025 and 2024

(dollars in thousands, except share and per share data)

Accumulated
Other
Retained Treasury Stock Comprehensive
Amount Surplus Earnings Shares Amount Loss Total
Balance, December 31, 2024 9,487,068 $ 949 $ 126,514 $ 124,963 214,161 $ (5,797) $ (33,121) $ 213,508
Net income - - - 11,978 - - - 11,978
Other comprehensive income - - - - - - 5,616 5,616
Cash dividends declared (0.62 per share) - - - (5,742) - - - (5,742)
Acquisition of treasury stock - - - - 15,822 (349) - (349)
Compensation expense related to restricted stock 1,220 - 295 - - (62) - 233
Director retainer stock 2,217 - 57 - - - - 57
Compensation expense related to stock options - - 124 - - - - 124
Balance, June 30, 2025 9,490,505 $ 949 $ 126,990 $ 131,199 229,983 $ (6,208) $ (27,505) $ 225,425
Accumulated
Other
Retained Treasury Stock Comprehensive
Amount Surplus Earnings Shares Amount Loss Total
Balance, December 31, 2023 8,310,847 $ 831 $ 97,700 $ 135,284 200,690 $ (5,397) $ (47,348) $ 181,070
Net income - - - 8,646 - - - 8,646
Other comprehensive loss - - - - - - (2,471) (2,471)
Cash dividends declared (0.60 per share) - - - (4,860) - - - (4,860)
Acquisition of treasury stock - - - - 19,191 (580) - (580)
Compensation expense related to restricted stock 1,004 - 207 - - - - 207
Compensation expense related to stock options - - 175 - - - - 175
Balance, June 30, 2024 8,311,851 $ 831 $ 98,082 $ 139,070 219,881 $ (5,977) $ (49,819) $ 182,187

All values are in US Dollars.

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6

NORWOOD FINANCIAL CORP

Consolidated Statements of Changes in Stockholders’ Equity(unaudited)

Three Months Ended June 30, 2025 and 2024

(dollars in thousands, except share and per share data)

Accumulated
Other
Retained Treasury Stock Comprehensive
Amount Surplus Earnings Shares Amount Loss Total
Balance, March 31, 2025 9,489,398 $ 949 $ 126,785 $ 127,865 229,979 $ (6,208) $ (28,684) $ 220,707
Net income - - - 6,205 - - - 6,205
Other comprehensive income - - - - - - 1,179 1,179
Cash dividends declared (0.31 per share) - - - (2,871) - - - (2,871)
Acquisition of treasury stock - - - - 4 - - -
Compensation expense related to restricted stock - - 116 - - - - 116
Director retainer stock 1,107 - 27 - - - - 27
Compensation expense related to stock options - - 62 - - - - 62
Balance, June 30, 2025 9,490,505 $ 949 $ 126,990 $ 131,199 229,983 $ (6,208) $ (27,505) $ 225,425
Accumulated
Other
Retained Treasury Stock Comprehensive
Amount Surplus Earnings Shares Amount Loss Total
Balance, March 31, 2024 8,310,847 $ 831 $ 97,893 $ 137,285 200,690 $ (5,397) $ (49,399) $ 181,213
Net income - - - 4,213 - - - 4,213
Other comprehensive loss - - - - - - (420) (420)
Cash dividends declared (0.30 per share) - - - (2,428) - - - (2,428)
Acquisition of treasury stock - - - - 19,191 (580) - (580)
Compensation expense related to restricted stock 1,004 - 103 - - - - 103
Compensation expense related to stock options - - 86 - - - - 86
Balance, June 30, 2024 8,311,851 $ 831 $ 98,082 $ 139,070 219,881 $ (5,977) $ (49,819) $ 182,187

All values are in US Dollars.

See accompanying notes to the unaudited consolidated financial statements.

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7

NORWOOD FINANCIAL CORP

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)
Six Months Ended June 30,
2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 11,978 $ 8,646
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (release of) credit losses 1,807 (276)
Depreciation 658 660
Amortization of intangible assets 30 38
Deferred income taxes (1,489) 303
Net (accretion) amortization of securities premiums and discounts (319) 221
Earnings and proceeds on life insurance policies (552) (520)
Gain on sales and write-downs of fixed assets and foreclosed real estate owned, net — (32)
Net amortization of loan fees 388 297
Net gain on sale of loans (112) (42)
Mortgage loans originated for sale (5,584) (2,360)
Proceeds from sale of loans originated for sale 5,696 2,402
Compensation expense related to stock options 124 175
Compensation expense related to restricted stock 233 207
Increase in accrued interest receivable (176) (206)
(Decrease) increase in accrued interest payable (1,640) 2,819
Other, net 4,811 1,024
Net cash provided by operating activities 15,853 13,356
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from maturities and principal reductions on mortgage-backed securities 30,223 29,321
Purchases (27,410) (23,990)
Purchase of regulatory stock (10,946) (4,684)
Redemption of regulatory stock 16,774 5,559
Net increase in loans (71,844) (38,824)
Proceeds from bank-owned life insurance 1,101 838
Purchase of premises and equipment (2,609) (1,087)
Proceeds from sales of foreclosed real estate owned — 109
Net cash used in investing activities (64,711) (32,758)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 138,671 16,013
Net decrease in short-term borrowings (86,569) (11,741)
Repayments of other borrowings (56,443) (36,149)
Proceeds from other borrowings 40,000 60,000
Purchase of treasury stock (349) (580)
Cash dividends paid (5,746) (4,866)
Net cash provided by financing activities 29,564 22,677
Decrease (increase) in cash and cash equivalents (19,294) 3,275
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 72,339 66,120
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 53,045 $ 69,395

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8

NORWOOD FINANCIAL CORP

Consolidated Statements of Cash Flows (Unaudited) (continued)

(dollars in thousands)
Six Months Ended June 30,
2025 2024
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest on deposits and borrowings $ 26,008 $ 22,154
Income taxes paid, net of refunds $ 196 $ 657
Supplemental Schedule of Noncash Investing Activities:
Transfers of loans to foreclosed real estate and repossession of other assets $ 1,238 $ 798
Dividends payable $ 2,871 $ 2,427

See accompanying notes to the unaudited consolidated financial statements.

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9

Notes to the Unaudited Consolidated Financial Statements

1.           Basis of Presentation

The unaudited consolidated financial statements include the accounts of Norwood Financial Corp (the “Company”) and its wholly-owned subsidiary, Wayne Bank (the “Bank”) and the Bank’s wholly-owned subsidiaries, WCB Realty Corp., Norwood Investment Corp., and WTRO Properties, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles for interim financial statements and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the consolidated financial position and results of operations of the Company. The operating results for the three-month and six-month periods ended June 30, 2025, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any other future interim period.

2.           Revenue Recognition

Under ASC Topic 606, management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans sold and earnings on bank-owned life insurance are not within the scope of this Topic.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three-month and six-month periods ended June 30:

Three months ended
June 30,
(dollars in thousands)
Noninterest Income 2025 2024
In-scope of Topic 606:
Service charges on deposit accounts $ 117 $ 113
ATM fees 61 107
Overdraft fees 385 345
Safe deposit box rental 21 20
Loan related service fees 133 189
Debit card fees 555 616
Fiduciary activities 226 225
Commissions on mutual funds and annuities 194 76
Gains on sales of other real estate owned — 32
Other income 177 157
Noninterest Income (in-scope of Topic 606) 1,869 1,880
Out-of-scope of Topic 606:
Loan servicing fees 48 38
Gains on sales of loans 65 36
Earnings on and proceeds from bank-owned life insurance 266 253
Noninterest Income (out-of-scope of Topic 606) 379 327
Total Noninterest Income $ 2,248 $ 2,207

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Six months ended
June 30,
(dollars in thousands)
Noninterest Income 2025 2024
In-scope of Topic 606:
Service charges on deposit accounts $ 227 $ 225
ATM fees 155 213
Overdraft fees 748 700
Safe deposit box rental 46 45
Loan related service fees 281 319
Debit card fees 1,143 1,142
Fiduciary activities 551 463
Commissions on mutual funds and annuities 340 144
Gains on sales of other real estate owned — 32
Other income 357 309
Noninterest Income (in-scope of Topic 606) 3,848 3,592
Out-of-scope of Topic 606:
Loan servicing fees 87 59
Gains on sales of loans 112 42
Earnings on and proceeds from bank-owned life insurance 552 520
Noninterest Income (out-of-scope of Topic 606) 751 621
Total Noninterest Income $ 4,599 $ 4,213

3.          Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and restricted stock, and are determined using the treasury stock method.

The following table sets forth the weighted average shares outstanding used in the computations of basic and diluted earnings per share.

(in thousands) Three Months Ended Six Months Ended
June 30, June 30,
2025 2024 2025 2024
Weighted average shares outstanding 9,260 8,090 9,264 8,104
Less: Unvested restricted shares (52) (45) (52) (46)
Basic EPS weighted average shares outstanding 9,208 8,045 9,212 8,058
Basic EPS weighted average shares outstanding 9,208 8,045 9,212 8,058
Add: Dilutive effect of stock options and restricted shares 2 3 2 3
Diluted EPS weighted average shares outstanding 9,210 8,048 9,214 8,061

For the three and six month periods ended June 30, 2025, there were 189,350 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $25.78 per share as of June 30, 2025.

For the three and six month periods ended June 30, 2024, there were 191,850 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $25.38 per share as of June 30, 2024.

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4.           Stock-Based Compensation

During the six-month period ended June 30, 2025, no stock options were granted. As of June 30, 2025, there was $124,000 of total unrecognized compensation cost related to non-vested options granted in 2024 under the 2024 Equity Incentive Plan, which will be fully realized by December 31, 2025. Compensation costs related to stock options amounted to $124,000 and $175,000 during the six-month periods ended June 30, 2025 and 2024, respectively.

A summary of the Company’s stock option activity for the six-month period ended June 30, 2025 is as follows:

Weighted
Average Exercise Weighted Average Aggregate
Price Remaining Intrinsic Value
Options Per Share Contractual Term (000)
Outstanding at January 1, 2025 220,600 $ 29.78 6.1 Yrs.
Granted — — —
Exercised — — —
Forfeited (20,000) 29.69 7.1
Outstanding at June 30, 2025 200,600 $ 29.78 6.1 Yrs.
Exercisable at June 30, 2025 169,100 $ 30.26 5.4 Yrs.

All values are in US Dollars.

Intrinsic value represents the amount by which the market price of the stock on the measurement date exceeded the exercise price of the option. The market price was $25.78 per share as of June 30, 2025 and $27.21 per share as of December 31, 2024.

A summary of the Company’s restricted stock activity for the six-month periods ended June 30, 2025 and 2024 is as follows:

2025 2024
Weighted- Weighted-
Average Average
Number of Grant Date Number of Grant Date
Restricted Restricted
Stock Fair Value Stock Fair Value
Non-vested, January 1, 54,484 $ 28.55 45,966 $ 29.90
Granted 1,220 26.44 1,004 24.90
Vested (1,400) 25.59 (1,200) 25.71
Forfeited (2,147) 28.99 — —
Non-vested, June 30, 52,157 $ 28.56 45,770 $ 29.35

The expected future compensation expense relating to the 52,157 shares of non-vested restricted stock outstanding as of June 30, 2025 is $1,271,000. This cost will be recognized over the remaining vesting period of 4.50 years. Compensation costs related to restricted stock amounted to $233,000 and $207,000 during the six-month periods ended June 30, 2025 and 2024, respectively.

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5.           Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss (in thousands) by component net of tax for the three and six months ended June 30, 2025 and 2024:

Unrealized gains (losses) on
available for sale securities
and pension liability (a)
Balance as of December 31, 2024 $ (33,121)
Other comprehensive income before reclassification 5,616
Amount reclassified from accumulated other comprehensive loss -
Total other comprehensive income 5,616
Balance as of June 30, 2025 $ (27,505)
Unrealized losses on
available for sale securities
and pension liability (a)
Balance as of December 31, 2023 $ (47,348)
Other comprehensive loss before reclassification (2,471)
Amount reclassified from accumulated other comprehensive income -
Total other comprehensive loss (2,471)
Balance as of June 30, 2024 $ (49,819)
Unrealized gains (losses) on
--- --- ---
available for sale securities
and pension liability (a)
Balance as of March 31, 2025 $ (28,684)
Other comprehensive income before reclassification 1,179
Amount reclassified from accumulated other comprehensive loss -
Total other comprehensive income 1,179
Balance as of June 30, 2025 $ (27,505)
Unrealized losses on
available for sale securities
and pension liability (a)
Balance as of March 31, 2024 $ (49,399)
Other comprehensive loss before reclassification (420)
Amount reclassified from accumulated other comprehensive loss -
Total other comprehensive loss (420)
Balance as of June 30, 2024 $ (49,819)

(a)All amounts are net of tax. Amounts in parentheses indicate debits.

There were no amounts reclassified out of accumulated other comprehensive loss for the three and six months ended June 30, 2025 and 2024.

6.           Off-Balance Sheet Financial Instruments and Guarantees

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.

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The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

A summary of the Bank’s financial instrument commitments is as follows:

(in thousands) June 30,
2025 2024
Commitments to grant loans $ 98,378 $ 94,714
Unfunded commitments under lines of credit 158,382 157,184
Standby letters of credit 5,745 7,221
$ 262,505 $ 259,119

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer and generally consists of real estate.

The Bank does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued, have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank, generally, holds collateral and/or personal guarantees supporting these commitments. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.

7.Securities

The amortized cost, gross unrealized gains and losses, approximate fair value, and allowance for credit losses of securities available for sale were as follows:

June 30, 2025
Gross Gross Allowance
Amortized Unrealized Unrealized for Credit Fair
Cost Gains Losses Losses Value
(In Thousands)
Available for Sale:
U.S. Treasury securities $ 17,791 $ 22 $ (1) $ - $ 17,812
U.S. Government agencies 10,000 15 (454) - 9,561
States and political subdivisions 106,469 - (18,721) - 87,748
Corporate obligations 3,535 27 (31) - 3,531
Mortgage-backed securities-
government sponsored entities 300,002 2,064 (18,258) - 283,808
Total debt securities $ 437,797 $ 2,128 $ (37,465) $ - $ 402,460

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December 31, 2024
Gross Gross Allowance
Amortized Unrealized Unrealized for Credit Fair
Cost Gains Losses Losses Value
(In Thousands)
Available for Sale:
U.S. Treasury securities $ 19,623 $ 12 $ (37) $ - $ 19,598
U.S. Government agencies 11,998 - (634) - 11,364
States and political subdivisions 106,677 - (19,403) - 87,274
Mortgage-backed securities-government
sponsored entities 301,992 115 (22,497) - 279,610
Total debt securities $ 440,290 $ 127 $ (42,571) $ - $ 397,846

The following tables summarize debt securities available for sale in a loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

June 30, 2025
Less than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury securities $ 2,000 $ (1) $ - $ - $ 2,000 $ (1)
U.S. Government agencies 1,995 (5) 4,551 (449) 6,546 (454)
States and political subdivisions 684 - 86,073 (18,721) 86,757 (18,721)
Corporate obligations 2,004 (31) - - 2,004 (31)
Mortgage-backed securities-government sponsored entities 48,355 (477) 98,042 (17,781) 146,397 (18,258)
$ 55,038 $ (514) $ 188,666 $ (36,951) $ 243,704 $ (37,465)
December 31, 2024
--- --- --- --- --- --- --- --- --- --- --- --- ---
Less than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury securities $ - $ - $ 9,961 $ (37) $ 9,961 $ (37)
U.S. Government agencies 6,988 (10) 4,376 (624) 11,364 (634)
States and political subdivisions 1,164 (21) 85,620 (19,382) 86,784 (19,403)
Mortgage-backed securities-government sponsored entities 177,674 (1,313) 94,237 (21,184) 271,911 (22,497)
$ 185,826 $ (1,344) $ 194,194 $ (41,227) $ 380,020 $ (42,571)

At June 30, 2025, the Company had 12 debt securities in an unrealized loss position in the less than twelve months category and 181 debt securities in the twelve months or more category. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decline in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the six months ended June 30, 2025 and 2024. The Company does not have the intent to sell the securities, and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

15

The amortized cost and fair value of debt securities as of June 30, 2025 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

Available for Sale
Amortized Cost Fair Value
(In Thousands)
Due in one year or less $ 13,765 $ 13,767
Due after one year through five years 8,496 8,381
Due after five years through ten years 69,515 59,496
Due after ten years 46,019 37,008
137,795 118,652
Mortgage-backed securities-government sponsored entities 300,002 283,808
$ 437,797 $ 402,460

There were no sales of securities available for sale for the three and six months ended June 30, 2025 and 2024.

Securities with a carrying value of $256,229,000 and $308,777,000 at June 30, 2025 and December 31, 2024, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

8.Loans Receivable and Allowance for Credit Losses

Set forth below is selected data relating to the composition of the loan portfolio at the dates indicated (dollars in thousands):

June 30, 2025 December 31, 2024
Real Estate Loans:
Residential $ 332,631 18.6 % $ 330,856 19.3 %
Commercial 736,969 41.1 716,875 41.8
Agricultural 62,077 3.5 63,488 3.7
Construction 68,013 3.8 53,020 3.1
Commercial loans 229,182 12.8 211,991 12.4
Other agricultural loans 27,132 1.5 30,077 1.7
Consumer loans to individuals 335,040 18.7 307,775 18.0
Total loans 1,791,044 100.0 % 1,714,082 100.0 %
Deferred fees, net (470) (444)
Total loans receivable 1,790,574 1,713,638
Allowance for credit losses (20,908) (19,843)
Net loans receivable $ 1,769,666 $ 1,693,795

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets. As of June 30, 2025 and December 31, 2024, foreclosed real estate owned totaled $0 and $0, respectively. During the six months ended June 30, 2025, there were no additions to the foreclosed real estate category. As of June 30, 2025, the Company has initiated formal foreclosure proceedings on six properties classified as consumer residential mortgages with an aggregate carrying value of $273,000.

16

The following tables show the amount of loans in each category that were individually and collectively evaluated for credit loss:

Real Estate Loans
Commercial Other Consumer
Residential Commercial Agricultural Construction Loans Agricultural Loans Total
June 30, 2025 (In thousands)
Individually evaluated $ 982 $ 7,163 $ — $ 50 $ 829 $ — $ 1,204 $ 10,228
Collectively evaluated 331,649 729,806 62,077 67,963 228,353 27,132 333,836 1,780,816
Total Loans $ 332,631 $ 736,969 $ 62,077 $ 68,013 $ 229,182 $ 27,132 $ 335,040 $ 1,791,044
Real Estate Loans
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Commercial Other Consumer
Residential Commercial Agricultural Construction Loans Agricultural Loans Total
(In thousands)
December 31, 2024
Individually evaluated $ 940 $ 7,197 $ — $ — $ 854 $ — $ 1,031 $ 10,022
Collectively evaluated 329,916 709,678 63,488 53,020 211,137 30,077 306,744 1,704,060
Total Loans $ 330,856 $ 716,875 $ 63,488 $ 53,020 $ 211,991 $ 30,077 $ 307,775 $ 1,714,082

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. Loan Review, in conjunction with a third-party consultant, also annually reviews all criticized credits and relationships of $1,500,000 and over to re-affirm risk ratings.

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of June 30, 2025 and December 31, 2024 (in thousands):

17

Current 31-60 Days Past Due 61-90 Days Past Due Greater than 90 Days Past Due and still accruing Non-accrual Total Past Due and Non-Accrual Total Loans
June 30, 2025
Real Estate loans
Residential $ 330,972 $ 128 $ 549 $ - $ 982 $ 1,659 $ 332,631
Commercial 729,599 1,319 341 - 5,710 7,370 736,969
Agricultural 62,029 - 48 - - 48 62,077
Construction 67,963 - - - 50 50 68,013
Commercial loans 228,832 128 77 - 145 350 229,182
Other agricultural loans 27,132 - - - - - 27,132
Consumer loans 332,778 825 233 - 1,204 2,262 335,040
Total $ 1,779,305 $ 2,400 $ 1,248 $ - $ 8,091 $ 11,739 $ 1,791,044
Current 31-60 Days Past Due 61-90 Days Past Due Greater than 90 Days Past Due and still accruing Non-accrual Total Past Due and Non-Accrual Total Loans
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
December 31, 2024
Real Estate loans
Residential $ 329,578 $ 70 $ 268 $ - $ 940 $ 1,278 $ 330,856
Commercial 709,821 1,182 129 - 5,743 7,054 716,875
Agricultural 63,488 - - - - 63,488
Construction 53,009 11 - - - 11 53,020
Commercial loans 211,520 194 117 33 127 471 211,991
Other agricultural loans 30,028 49 - - - 49 30,077
Consumer loans 305,676 805 263 121 910 2,099 307,775
Total $ 1,703,120 $ 2,311 $ 777 $ 154 $ 7,720 $ 10,962 $ 1,714,082

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for credit losses. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the allowance.

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The following table presents the allowance for credit losses by the classes of the loan portfolio:

(In thousands) Residential Real Estate Commercial Real Estate Agricultural Construction Commercial Other Agricultural Consumer Total
Beginning balance, December 31, 2024 $ 1,146 $ 11,406 $ 48 $ 884 $ 1,732 $ 162 $ 4,465 $ 19,843
Charge Offs - (49) - - - (48) (783) (880)
Recoveries - - - - 96 - 85 181
(Release of) Provision for credit losses (135) (318) (9) 279 105 50 1,792 1,764
Ending balance, June 30, 2025 $ 1,011 $ 11,039 $ 39 $ 1,163 $ 1,933 $ 164 $ 5,559 $ 20,908
Ending balance individually evaluated $ - $ 315 $ - $ - $ - $ - $ 294 $ 609
Ending balance collectively evaluated $ 1,011 $ 10,724 $ 39 $ 1,163 $ 1,933 $ 164 $ 5,265 $ 20,299
(In thousands) Residential Real Estate Commercial Real Estate Farmland Construction Commercial Other Agricultural Consumer Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Beginning balance, March 31, 2025 $ 1,015 $ 10,585 $ 81 $ 985 $ 1,972 $ 169 $ 5,635 $ 20,442
Charge Offs - - - - - (10) (454) (464)
Recoveries - - - - 42 - 47 89
(Release of) Provision for credit losses (4) 454 (42) 178 (81) 5 331 841
Ending balance, June 30, 2025 $ 1,011 $ 11,039 $ 39 $ 1,163 $ 1,933 $ 164 $ 5,559 $ 20,908
(In thousands) Residential Real Estate Commercial Real Estate Agricultural Construction Commercial Other Agricultural Consumer Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Beginning balance, December 31, 2023 $ 1,351 $ 11,871 $ 58 $ 933 $ 1,207 $ 94 $ 3,454 $ 18,968
Charge Offs - - - - (85) - (939) (1,024)
Recoveries 42 104 - - - - 44 190
(Release of) Provision for credit losses (262) (2,423) (17) (93) 913 36 1,518 (328)
Ending balance, June 30, 2024 $ 1,131 $ 9,552 $ 41 $ 840 $ 2,035 $ 130 $ 4,077 $ 17,806
Ending balance individually evaluated<br>‎for impairment $ - $ - $ - $ - $ - $ - $ 164 $ 164
Ending balance collectively evaluated<br>‎for impairment $ 1,131 $ 9,552 $ 41 $ 840 $ 2,035 $ 130 $ 3,913 $ 17,642
(In thousands) Residential Real Estate Commercial Real Estate Farmland Construction Commercial Other Agricultural Consumer Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Beginning balance, March 31, 2024 $ 1,197 $ 9,831 $ 84 $ 831 $ 1,987 $ 168 $ 3,922 $ 18,020
Charge Offs - - - - (30) - (500) (530)
Recoveries - 2 - - - - 17 19
(Release of) Provision for credit losses (66) (281) (43) 9 78 (38) 638 297
Ending balance, June 30, 2024 $ 1,131 $ 9,552 $ 41 $ 840 $ 2,035 $ 130 $ 4,077 $ 17,806

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During the six months ended June 30, 2025, the Company recorded a provision for credit losses related to loans totaling $1,764,000. Factors impacting the provision include changes in the cumulative loss rates applied to the respective loan pools due to loss activity being added or subtracted with the passage of time, and variances in Qualitative Factors and Economic Factors.

The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience. The Company chose to apply qualitative factors based on “quantitative metrics” which link the quantifiable metrics to historical changes in the qualitative factor categories. The Company also chose to apply economic projections to the model. A select group of economic indicators was utilized which was then correlated to the historical loss experience of the Company and its peers. Based on the correlation results, the economic adjustments are then weighted for relevancy and applied to the individual loan pools.

The following table presents the carrying value of loans on nonaccrual status and loans past due over 90 days still accruing interest (in thousands):

Nonaccrual Nonaccrual Loans Past Due
with no with Total Over 90 Days Total
ACL ACL Nonaccrual Still Accruing Nonperforming
June 30, 2025
Real Estate loans
Residential $ 982 $ - $ 982 $ - $ 982
Commercial 5,689 21 5,710 - 5,710
Agricultural - - - - -
Construction 50 - 50 - 50
Commercial loans 145 - 145 - 145
Other agricultural loans - - - - -
Consumer loans 288 916 1,204 - 1,204
Total $ 7,154 $ 937 $ 8,091 $ - $ 8,091
Nonaccrual Nonaccrual Loans Past Due
--- --- --- --- --- --- --- --- --- --- ---
with no with Total Over 90 Days Total
ACL ACL Nonaccrual Still Accruing Nonperforming
December 31, 2024
Real Estate loans
Residential $ 936 $ 4 $ 940 $ - $ 940
Commercial 5,739 4 5,743 - 5,743
Agricultural - - - - -
Construction - - - - -
Commercial loans 127 - 127 33 160
Other agricultural loans - - - - -
Consumer loans 570 340 910 121 1,031
Total $ 7,372 $ 348 $ 7,720 $ 154 $ 7,874

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Based on the most recent analysis performed, the following table presents the recorded investment in non-homogenous pools by internal risk rating systems (in thousands):

Revolving Revolving
Term Loans Amortized Costs Basis by Origination Year Loans Loans
Amortized Converted
June 30, 2025 2025 2024 2023 2022 2021 Prior Cost Basis to Term Total
Commercial real estate
Risk Rating
Pass $ 60,518 $ 101,229 $ 71,736 $ 118,247 $ 93,843 $ 257,872 $ 19,688 $ - $ 723,133
Special Mention - 4 - 255 - 1,901 - - 2,160
Substandard - 135 - - 2,470 8,671 400 - 11,676
Doubtful - - - - - - - - -
Total $ 60,518 $ 101,368 $ 71,736 $ 118,502 $ 96,313 $ 268,444 $ 20,088 $ - $ 736,969
Commercial real estate
Current period gross charge-offs $ - $ - $ - $ - $ - $ 49 $ - $ - $ 49
Real Estate - Agriculture
Risk Rating
Pass $ 1,817 $ 6,081 $ 3,741 $ 11,712 $ 3,843 $ 33,955 $ 324 $ - $ 61,473
Special Mention - - - - - 429 150 - 579
Substandard - - - - - - 25 - 25
Doubtful - - - - - - - - -
Total $ 1,817 $ 6,081 $ 3,741 $ 11,712 $ 3,843 $ 34,384 $ 499 $ - $ 62,077
Real Estate - Agriculture
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial loans
Risk Rating
Pass $ 40,841 $ 46,075 $ 28,062 $ 27,408 $ 14,956 $ 22,119 $ 46,451 $ - $ 225,912
Special Mention - - - 23 - 95 14 - 132
Substandard - - 265 392 648 858 975 - 3,138
Doubtful - - - - - - - - -
Total $ 40,841 $ 46,075 $ 28,327 $ 27,823 $ 15,604 $ 23,072 $ 47,440 $ - $ 229,182
Commercial loans
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -

21

Other agricultural loans
Risk Rating
Pass $ 1,321 $ 3,477 $ 1,522 $ 2,914 $ 2,086 $ 5,567 $ 8,663 $ - $ 25,550
Special Mention - - - - - 107 - - 107
Substandard - - - - - - 1,475 - 1,475
Doubtful - - - - - - - - -
Total $ 1,321 $ 3,477 $ 1,522 $ 2,914 $ 2,086 $ 5,674 $ 10,138 $ - $ 27,132
Other agricultural loans
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ 48 $ -
Total
Risk Rating
Pass $ 104,497 $ 156,862 $ 105,061 $ 160,281 $ 114,728 $ 319,513 $ 75,126 $ - $ 1,036,068
Special Mention - 4 - 278 - 2,532 164 - 2,978
Substandard - 135 265 392 3,118 9,529 2,875 - 16,314
Doubtful - - - - - - - - -
Total $ 104,497 $ 157,001 $ 105,326 $ 160,951 $ 117,846 $ 331,574 $ 78,165 $ - $ 1,055,360

‎

22

Revolving Revolving
Term Loans Amortized Costs Basis by Origination Year Loans Loans
Amortized Converted
December 31, 2024 2024 2023 2022 2021 2020 Prior Cost Basis to Term Total
Commercial real estate
Risk Rating
Pass $ 102,773 $ 74,242 $ 121,881 $ 104,720 $ 60,941 $ 217,435 $ 20,829 $ - $ 702,821
Special Mention 5 - 262 - - 2,148 - - 2,415
Substandard 135 - - 2,461 1,405 7,238 400 - 11,639
Doubtful - - - - - - - - -
Total $ 102,913 $ 74,242 $ 122,143 $ 107,181 $ 62,346 $ 226,821 $ 21,229 $ - $ 716,875
Commercial real estate
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate - Agriculture
Risk Rating
Pass $ 6,257 $ 3,756 $ 12,036 $ 3,960 $ 7,148 $ 29,038 $ 336 $ - $ 62,531
Special Mention - - - - - 773 150 - 923
Substandard - - - - - - 34 - 34
Doubtful - - - - - - - - -
Total $ 6,257 $ 3,756 $ 12,036 $ 3,960 $ 7,148 $ 29,811 $ 520 $ - $ 63,488
Real Estate - Agriculture
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial loans
Risk Rating
Pass $ 57,939 $ 34,088 $ 29,465 $ 19,163 $ 10,233 $ 15,042 $ 42,906 $ - $ 208,836
Special Mention - - 25 - - 106 14 - 145
Substandard - 277 429 711 - 743 850 - 3,010
Doubtful - - - - - - - - -
Total $ 57,939 $ 34,365 $ 29,919 $ 19,874 $ 10,233 $ 15,891 $ 43,770 $ - $ 211,991
Commercial loans
Current period gross charge-offs $ - $ 11 $ - $ - $ 8 $ 51 $ 30 $ - $ 100

23

Other agricultural loans
Risk Rating
Pass $ 4,358 $ 1,836 $ 3,721 $ 2,379 $ 2,134 $ 4,353 $ 9,697 $ - $ 28,478
Special Mention - - - - - 127 - - 127
Substandard - - - - - - 1,472 - 1,472
Doubtful - - - - - - - - -
Total $ 4,358 $ 1,836 $ 3,721 $ 2,379 $ 2,134 $ 4,480 $ 11,169 $ - $ 30,077
Other agricultural loans
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Total
Risk Rating
Pass $ 171,327 $ 113,922 $ 167,103 $ 130,222 $ 80,456 $ 265,868 $ 73,768 $ - $ 1,002,666
Special Mention 5 - 287 - - 3,154 164 - 3,610
Substandard 135 277 429 3,172 1,405 7,981 2,756 - 16,155
Doubtful - - - - - - - - -
Total $ 171,467 $ 114,199 $ 167,819 $ 133,394 $ 81,861 $ 277,003 $ 76,688 $ - $ 1,022,431

24

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due over 90 days and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the carrying value of residential and consumer loans based on payment activity (in thousands):

Revolving Revolving
Term Loans Amortized Costs Basis by Origination Year Loans Loans
Amortized Converted
June 30, 2025 2025 2024 2023 2022 2021 Prior Cost Basis to Term Total
Residential real estate
Payment Performance
Performing $ 9,024 $ 29,670 $ 40,390 $ 56,912 $ 50,204 $ 114,600 $ 30,849 $ - $ 331,649
Nonperforming - - 125 218 174 428 37 - 982
Total $ 9,024 $ 29,670 $ 40,515 $ 57,130 $ 50,378 $ 115,028 $ 30,886 $ - $ 332,631
Residential real estate
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Construction
Payment Performance
Performing $ 6,971 $ 35,973 $ 13,639 $ 8,679 $ 342 $ 118 $ 2,241 $ - $ 67,963
Nonperforming - - - 50 - - - - 50
Total $ 6,971 $ 35,973 $ 13,639 $ 8,729 $ 342 $ 118 $ 2,241 $ - $ 68,013
Construction
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Consumer loans to individuals
Payment Performance
Performing $ 74,280 $ 111,882 $ 77,601 $ 42,260 $ 12,300 $ 14,736 $ 777 $ - $ 333,836
Nonperforming 73 209 351 369 109 93 - - 1,204
Total $ 74,353 $ 112,091 $ 77,952 $ 42,629 $ 12,409 $ 14,829 $ 777 $ - $ 335,040
Consumer loans to individuals
Current period gross charge-offs $ 3 $ 191 $ 229 $ 209 $ 59 $ 92 $ - $ - $ 783
Total
Payment Performance
Performing $ 90,275 $ 177,525 $ 131,630 $ 107,851 $ 62,846 $ 129,454 $ 33,867 $ - $ 733,448
Nonperforming 73 209 476 637 283 521 37 - 2,236
Total $ 90,348 $ 177,734 $ 132,106 $ 108,488 $ 63,129 $ 129,975 $ 33,904 $ - $ 735,684

25

Revolving Revolving
Term Loans Amortized Costs Basis by Origination Year Loans Loans
Amortized Converted
December 31, 2024 2024 2023 2022 2021 2020 Prior Cost Basis to Term Total
Residential real estate
Payment Performance
Performing $ 22,842 $ 41,384 $ 60,194 $ 52,712 $ 32,161 $ 89,965 $ 30,658 $ - $ 329,916
Nonperforming - 125 52 184 - 560 19 - 940
Total $ 22,842 $ 41,509 $ 60,246 $ 52,896 $ 32,161 $ 90,525 $ 30,677 $ - $ 330,856
Residential real estate
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Construction
Payment Performance
Performing $ 28,817 $ 12,986 $ 9,024 $ 431 $ - $ 144 $ 1,618 $ - $ 53,020
Nonperforming - - - - - - - - -
Total $ 28,817 $ 12,986 $ 9,024 $ 431 $ - $ 144 $ 1,618 $ - $ 53,020
Construction
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Consumer loans to individuals
Payment Performance
Performing $ 125,254 $ 93,392 $ 52,009 $ 15,679 $ 8,316 $ 11,207 $ 887 $ - $ 306,744
Nonperforming 97 401 377 114 26 16 - - 1,031
Total $ 125,351 $ 93,793 $ 52,386 $ 15,793 $ 8,342 $ 11,223 $ 887 $ - $ 307,775
Consumer loans to individuals
Current period gross charge-offs $ 123 $ 511 $ 850 $ 203 $ 87 $ 75 $ - $ - $ 1,849
Total
Payment Performance
Performing $ 176,913 $ 147,762 $ 121,227 $ 68,822 $ 40,477 $ 101,316 $ 33,163 $ - $ 689,680
Nonperforming 97 526 429 298 26 576 19 - 1,971
Total $ 177,010 $ 148,288 $ 121,656 $ 69,120 $ 40,503 $ 101,892 $ 33,182 $ - $ 691,651

Occasionally, the Bank modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, and other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

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In some cases, the Bank provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. During the six months ended June 30, 2025, there were modifications made to borrowers experiencing financial difficulty consisting of six loan relationships. The following table presents modifications made to borrowers experiencing financial difficulty:

Significant Payment Delay
Amortized Cost Basis at June 30, 2025 % of Total Class of Financing Receivable Financial Effect
(in thousands)
Commercial real estate loans $ 295 0.04 % Deferred principal for 6 months
Commercial loans 481 0.21 Deferred principal for 4-6 months
Consumer loans to individuals 6 0.00 Deferred principal for 4 months
Total $ 782
Term Extension
Amortized Cost Basis at June 30, 2025 % of Total Class of Financing Receivable Financial Effect
(in thousands)
Commercial real estate loans $ 1,423 0.19 % Added a weighted-average 6.0 months to the life of loans
Commercial loans 286 0.12 Added a weighted-average 5.0 years to the life of loans
Total $ 1,709
Combination -Significant Payment Delay and Term Extension
Amortized Cost Basis at June 30, 2025 % of Total Class of Financing Receivable Financial Effect
Commercial real estate loans $ 3,749 0.51 % Deferred principal for 9 months and extended term by 9 months
Total $ 3,749

The following table provides the amortized cost basis of financing receivables that had a payment default during the period and were modified (in thousands):

Amortized Cost Basis of Modified Loans That Subsequently Defaulted
Term Extension
Commercial real estate loans $ 1,423
$ 1,423

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The following table depicts the performance of loans that have been modified during the period for which a payment default has occurred (in thousands):

Payment Status (Amortized Cost Basis)
30-59 Days Past Due 60-89 Days Past Due 90 + Days Past Due Total Past Due
Commercial real estate loans $ 1,423 $ - $ - $ 1,423
$ 1,423 $ - $ - $ 1,423

The Company’s primary business activity as of June 30, 2025 was with customers located in northeastern Pennsylvania and the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to repay their loans is influenced by the region’s economy.

As of June 30, 2025, the Company considered its concentration of credit risk to be acceptable. The highest concentrations are in commercial rentals with $162.7 million of loans outstanding, or 9.1% of total loans outstanding, and residential rentals with loans outstanding of $117.2 million, or 6.6% of loans outstanding. For the six months ended June 30, 2025, the Company recognized charge offs of $0 on commercial rentals and $0 on residential rentals. The following table presents additional details regarding the company’s largest loan concentrations by industry as of June 30, 2025 (in thousands):

Account Type Outstanding as of June 30, 2025 Percent of Loans as of June 30, 2025
Commercial Rentals $ 162,674 9.12 %
Residential Rentals 117,244 6.57
Hotels/Motels 118,552 6.65
Builders/Contractors 37,375 2.10
Dairy Cattle/Milk Product 43,369 2.43
Fuel/Gas Stations 48,528 2.72
Government Support 22,656 1.27
Mobile Home Park 20,221 1.13
Wineries 22,448 1.26
Camps 23,635 1.33
Resorts 35,589 2.00

9.          Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In accordance with fair value accounting guidance, the Company measures, records, and reports various types of assets and liabilities at fair value on either a recurring or non-recurring basis in the Consolidated Financial Statements. Those assets and liabilities are presented in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis”. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

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Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 16 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2025 and December 31, 2024 are as follows:

Fair Value Measurement Using
Reporting Date
Description Total Level 1 Level 2 Level 3
June 30, 2025 (In thousands)
ASSETS
Available for Sale:
U.S. Treasury securities $ 17,812 $ 17,812 $ - $ -
U.S. Government agencies 9,561 - 9,561 -
States and political subdivisions 87,748 - 87,748 -
Corporate obligations 3,531 - 3,531 -
Mortgage-backed securities-government
sponsored entities 283,808 - 283,808 -
Interest rate derivatives 875 - 875 -
LIABILITIES
Interest rate derivatives 875 - 875 -
Description Total Level 1 Level 2 Level 3
December 31, 2024 (In thousands)
ASSETS
Available for Sale:
U.S. Treasury securities $ 19,598 $ 19,598 $ - $ -
U.S. Government agencies 11,364 - 11,364 -
States and political subdivisions 87,274 - 87,274 -
Mortgage-backed securities-government
sponsored entities 279,609 - 279,609 -
Interest rate derivatives 1,193 - 1,193 -
LIABILITIES
Interest rate derivatives 1,193 - 1,193 -

Securities:

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.

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Interest Rate Swaps:

The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the Secured Overnight Financing Rate (“SOFR”) swap curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using SOFR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2025 and December 31, 2024 are as follows:

Fair Value Measurement Using Reporting Date
(In thousands)
Description Total Level 1 Level 2 Level 3
June 30, 2025
Individually analyzed loans held for investment $ 9,619 $ - $ - $ 9,619
December 31, 2024
Individually analyzed loans held for investment $ 9,363 $ - $ - $ 9,363

Individually analyzed loans held for investment:

The Company measures impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the lowest level of input that is significant to the fair value measurements.

As of June 30, 2025, the fair value investment in individually analyzed loans totaled $9,619,000, which included 52 loan relationships with a carrying value of $7,153,000 that did not require a specific allowance for credit loss since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan. As of June 30, 2025, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $456,000. As of June 30, 2025, the fair value investment in individually analyzed loans included 39 loan relationships with a carrying value of $3,075,000 that required a valuation allowance of $609,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of June 30, 2025, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $0 over the life of the loan.

As of December 31, 2024, the fair value investment in individually analyzed loans totaled $9,363,000, which included 34 loan relationships with a carrying value of $6,978,000 that did not require a specific allowance for credit loss since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan. As of December 31, 2024, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $456,000 over the life of the loans. As of December 31, 2024, the fair value investment in individually analyzed loans included 34 loan relationships with a carrying value of $3,044,000 that required a valuation allowance of $659,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2024, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $0 over the life of the loan.

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The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands) Fair Value Estimate Valuation Techniques Unobservable Input Range (Weighted Average)
June 30, 2025
Individually analyzed loans held for investment $ 9,619 Appraisal of collateral(1) Appraisal adjustments(2) 0%-100.0% (9.48%)
Quantitative Information about Level 3 Fair Value Measurements
--- --- --- --- --- ---
(dollars in thousands) Fair Value Estimate Valuation Techniques Unobservable Input Range (Weighted Average)
December 31, 2024
Individually analyzed loans held for investment $ 9,363 Appraisal of collateral(1) Appraisal adjustments(2) 0%-50.0% (8.01%)

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less any associated allowance.

(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

Assets and Liabilities Not Required to be Measured or Reported at Fair Value

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2025 and December 31, 2024.

Loans receivable (carried at cost):

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Mortgage servicing rights (carried at lower of cost or fair value)

The Company utilizes a third party provider to estimate the fair value of certain loan servicing rights. Fair value for the purpose of this measurement is defined as the amount at which the asset could be exchanged in a current transaction between willing parties, other than in a forced liquidation.

Deposit liabilities (carried at cost):

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Other borrowings (carried at cost):

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a fair value that is deemed to represent the transfer price if the liability were assumed by a third party.

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The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at June 30, 2025 and December 31, 2024. (In thousands)

Fair Value Measurements at June 30, 2025
Carrying Amount Fair Value Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents (1) $ 53,045 $ 53,045 $ 53,045 $ - $ -
Loans receivable, net 1,769,666 1,758,620 - - 1,758,620
Mortgage servicing rights 205 638 - - 638
Regulatory stock (1) 7,538 7,538 7,538 - -
Bank owned life insurance (1) 46,099 46,099 46,099 - -
Accrued interest receivable (1) 8,642 8,642 8,642 - -
Financial liabilities:
Deposits 1,997,834 1,933,904 1,119,178 - 814,726
Short-term borrowings (1) 26,500 26,500 26,500 - -
Other borrowings 85,350 85,455 - - 85,455
Accrued interest payable (1) 10,975 10,975 10,975 - -
Off-balance sheet financial instruments:
Commitments to extend credit and<br>‎outstanding letters of credit - - - - -
Fair Value Measurements at December 31, 2024
--- --- --- --- --- --- --- --- --- --- ---
Carrying Amount Fair Value Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents (1) $ 72,339 $ 72,339 $ 72,339 $ - $ -
Loans receivable, net 1,693,795 1,687,128 - - 1,687,128
Mortgage servicing rights 199 575 - - 575
Regulatory stock (1) 13,366 13,366 13,366 - -
Bank owned life insurance (1) 46,657 46,657 46,657 - -
Accrued interest receivable (1) 8,466 8,466 8,466 - -
Financial liabilities:
Deposits 1,859,163 1,788,123 1,023,619 - 764,504
Short-term borrowings (1) 113,069 113,069 113,069 - -
Other borrowings 101,793 102,220 - - 102,220
Accrued interest payable (1) 12,615 12,615 12,615 - -
Off-balance sheet financial instruments:
Commitments to extend credit and<br>‎outstanding letters of credit - - - - -

(1)This financial instrument is carried at cost, which approximates the fair value of the instrument.

10.Interest Rate Swaps

The Company enters into interest rate swaps that allow our commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate into a fixed-rate. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are not marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. There was no effect on earnings in any periods presented. At June 30, 2025 and December 31, 2024, based upon the swap contract values, the Company pledged cash in the amount of $350,000 as collateral for its interest rate swaps with a third-party financial institution. The fair value of the swaps as of June 30, 2025 and December 31, 2024 was $875,000 and $1,193,000, respectively.

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Summary information regarding these derivatives is presented below

(Amounts in thousands)
Notional Amount Fair Value
June 30, 2025 December 31, 2024 Interest Rate Paid Interest Rate Received June 30, 2025 December 31, 2024
Customer interest rate swap
Maturing November, 2030 $ 5,565 $ 5,766 Term SOFR + Margin Fixed $ 534 $ 729
Maturing December, 2030 3,617 3,758 Term SOFR + Margin Fixed 341 464
Total $ 9,182 $ 9,524 $ 875 $ 1,193
Third party interest rate swap
Maturing November, 2030 $ 5,565 $ 5,766 Fixed Term SOFR + Margin $ 534 $ 729
Maturing December, 2030 3,617 3,758 Fixed Term SOFR + Margin 341 464
Total $ 9,182 $ 9,524 $ 875 $ 1,193

The following table presents the fair values of derivative instruments in the Consolidated Balance Sheet.

(Amounts in thousands)
Assets Liabilities
Balance Sheet Location Fair Value Balance Sheet Location Fair Value
June 30, 2025
Interest rate derivatives Other assets $ 875 Other liabilities $ 875
December 31, 2024
Interest rate derivatives Other assets 1,193 Other liabilities 1,193

11.New and Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance is effective for public business entities for annual periods beginning after December 15, 2024, and for annual periods beginning after December 15, 2025, for all other entities.  The Company adopted the new disclosures for the annual periods beginning on January 1, 2025. The Company will include the applicable and relevant required disclosures in the Income Taxes footnote in the Form 10-K.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. This ASU requires disclosure in the notes to financial statements of specified information about certain costs and expenses. Specific disclosures are required for (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas producing activities. The amendments in this update do not change or remove current expense disclosure requirements. However, the amendments affect where this information appears in the notes to financial statements because entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. The amendments in ASU 2024-03 apply only to public business entities and are effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this new guidance on its financial statements.

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In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which revises the effective date of ASU 2024-03 (on disclosures about disaggregation of income statement expenses) “to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.” Entities within the ASU’s scope are permitted to early adopt the ASU. The Company is currently evaluating the impact of this new guidance on its financial statements.

12.Segment Reporting

ASC Topic 280 – Segment Reporting identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s Chief Operating Decision Maker, our Chief Executive Officer, in deciding how to develop strategy, allocate resources and assess performance.

The Company acts as an independent community financial services provider and offers traditional banking related financial services to individual, business and government customers. Through its Community Office and automated teller machine network, the Company offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of safe deposit services. The Company also performs personal, corporate, pension and fiduciary services through its Trust Department.

Operating segments are aggregated into one segment, as operating results for all segments are similar. Accordingly, all the financial service operations are considered by management to be aggregated in one reportable operating segment, Community Banking.

The chief operating decision maker assesses performance and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. Net income is used to monitor budget versus actual results.

The chief operating decision maker uses revenue streams and significant expenses to assess performance and evaluate return on assets and return on equity. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis and budget to actual results are used in assessing performance and in establishing compensation.

The accounting policies for the Community Banking segment are the same as those of our consolidated entity, which are described in Note 2 in the Annual Report filed on Form 10-K. Information utilized in the performance assessment by the chief operating decision maker is consistent with the level of aggregation disclosed in the Consolidated Statement of Income. The measure of segment assets is reported on the balance sheet as total consolidated assets.

13.Proposed Acquisition of PB Bankshares, Inc.

On July 7, 2025, the Company and its wholly owned subsidiary, Wayne Bank, and PB Bankshares, Inc. (“PB Bankshares”), and its wholly owned subsidiary, Presence Bank, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which PB Bankshares will merge with and into the Company, with the Company as the surviving corporation. Concurrent with the merger, it is expected that Presence Bank will merge with and into Wayne Bank.

PB Bankshares’ common stock is traded on the Nasdaq Capital Market under the trading symbol PBBK. At June 30, 2025, PB Bankshares had total consolidated assets of $464.1 million, total deposits of $363.4 million and total stockholders’ equity of $50.3 million.

Presence Bank is a stock savings bank organized under the laws of the Commonwealth of Pennsylvania and is subject to comprehensive regulation and examination by the FDIC and the Pennsylvania Department of Banking and Securities. Presence Bank operates from four offices and two loan production offices in Chester, Lancaster and Dauphin Counties, Pennsylvania. Presence Bank’s primary market area for deposits includes the communities in which it maintains banking office locations, while its primary lending market area is broader and includes customers in Lebanon, Dauphin and Cumberland Counties in Pennsylvania. Presence Bank is a community-oriented bank offering a variety of financial products and services to meet the needs of its customers.

Pursuant to the terms of the Merger Agreement, shareholders of PB Bankshares will have the opportunity to elect to receive for each share of PB Bankshares common stock they own, either 0.7850 shares of the Company’s common stock or $19.75 in cash. All shareholder elections will be subject to the allocation and proration procedures set forth in the Merger Agreement which are intended to ensure that 80% of the shares of PB Bankshares will be exchanged for the Company’s common stock and 20% of the shares of PB

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Bankshares will be exchanged for cash. In the event of a greater than 20% decline in market value of the Company’s common stock and such decline is more than 20% of a decline in the market as measured by an index, PB Bankshares may, in certain circumstances, be able to terminate the Merger Agreement unless the Company increases the number of shares into which PB Bankshares common stock may be converted.

The senior management of the Company and Wayne Bank will remain the same following the merger. Following completion of the merger, Janak M. Amin, President and CEO of PB Bankshares and Presence Bank, will be appointed as Chief Operating Officer of the Company and Wayne Bank. Concurrently with the entering into of the Merger Agreement, the Company entered into an employment agreement and a non-compete and non-solicitation agreement with Mr. Amin, such agreements to be effective upon completion of the Merger. The Company may enter into additional employment agreements and non-compete and non-solicitation agreements with other executive officers of PB Bankshares, to be effective upon completion of the Merger.

On or immediately after the Effective Time of the Merger, the Company and Wayne Bank will appoint two former non-employee directors of Presence Bank to the boards of directors of the Company and Wayne Bank (the “Appointees”). One Appointee shall be appointed as a member of the class of the Company’s board of directors with a term expiring at the annual meeting in the calendar year two years after the Effective Time of the Merger and one with a term expiring in the calendar year three years after the Effective Time of the Merger. In addition, all non-employee directors serving on the Board of Directors of Bankshares as of the date of the Merger Agreement, who will not be selected to join the Boards of the Company and Wayne Bank, will be invited to join a newly-formed regional advisory board of Wayne Bank.

The merger is subject to customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of PB Bankshares. The merger is expected to be completed in the fourth quarter of 2025 or in the first quarter of 2026.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, legislative and regulatory changes, monetary, trade, tariff and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, the rate of inflation, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices, instability in the banking system, and the potential for a recessionary economy. Further description of the risks and uncertainties to the business are included in the Company’s other filings with the Securities and Exchange Commission.

The majority of the assets and liabilities of a financial institution are monetary in nature, and therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, employment shortages, the interest rate environment, and geopolitical tensions. It is reasonably foreseeable that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including expected credit losses on loans and the fair value of financial instruments that are carried at fair value.

Our operations are subject to risks and uncertainties surrounding our exposure to changes in the interest rate environment. Earnings and liquidity depend to a great extent on our interest rates. Interest rates are highly sensitive to many factors beyond our control, including competition, general economic conditions, geopolitical tensions and monetary and fiscal policies of various governmental and regulatory authorities, including the Federal Reserve. Conditions such as inflation, deflation, recession, unemployment and other factors beyond our control may also affect interest rates. The nature and timing of any changes in interest rates or general economic conditions and their effect on us cannot be controlled and are difficult to predict. If the rate of interest we pay on our interest-bearing liabilities increases more than the rate of interest we receive on our interest-earning assets, our net interest income, and therefore our earnings, could contract and be materially adversely affected. Our earnings could also be materially adversely affected if the rates on interest-earning assets fall more quickly than those on our interest-bearing liabilities. Changes in interest rates could also create competitive pressures, which could impact our liquidity position. See “Item 3. Quantitative and Qualitative Disclosures about Market Risk – Asset/Liability Management.”

Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

Note 2 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2024 (included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2024) lists significant accounting policies used in the development and presentation of its financial statements. This discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, and the determination of goodwill impairment. Please refer to the discussion of the allowance for credit losses calculation under “Changes in Financial Condition - Loans” below.

In connection with the acquisition of North Penn in 2011, we recorded goodwill in the amount of $9.7 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. In connection with the acquisition of Delaware in 2016, we recorded goodwill in the amount of $1.6 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. In connection with the acquisition of UpState New York Bancorp, Inc. in July 2020, we recorded goodwill in the amount of $17.9 million, representing the excess of amounts paid over the fair

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value of the net assets of the institution acquired at the date of acquisition. Goodwill is tested annually and deemed impaired when the carrying value of goodwill exceeds its implied fair value.

Changes in Financial Condition

General

Total assets as of June 30, 2025 were $2.365 billion compared to $2.317 billion as of December 31, 2024. The increase was due primarily to a $77.0 million increase in gross loans outstanding.

Other Assets

Other assets as of June 30, 2025 were $9.2 million compared to $18.2 million as of December 31, 2024. The decrease was primarily due to the movement of $6.9 million in prepaid dealer fees from other assets to loans receivable.

Securities

The fair value of securities available for sale as of June 30, 2025 was $402.5 million compared to $397.8 million as of December 31, 2024. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decrease in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the six months ended June 30, 2025, or the six months ended June 30, 2024. The Company does not intend to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

Loans

Loans receivable totaled $1.770 billion at June 30, 2025 compared to $1.694 billion as of December 31, 2024. The $75.9 million increase in net loans receivable during the six months ended June 30, 2025, was due primarily to a $20.1 million increase in commercial real estate loans, a $17.2 million increase in commercial loans, a $27.3 million increase in consumer loans, and a $12.4 million increase in residential, agricultural and construction loans, net.

The allowance for credit losses totaled $20,908,000 as of June 30, 2025, and represented 1.17% of total loans outstanding, compared to $19,843,000, or 1.16% of total loans outstanding, at December 31, 2024. The Company had net charge-offs for the six months ended June 30, 2025 of $699,000, compared to $834,000 in the corresponding period in 2024. The Company’s management assesses the adequacy of the allowance for credit losses on a quarterly basis. Based on management’s best judgement, the qualitative factors are applied to the final adjusted loss rate each quarter. Management considers the allowance for credit losses adequate at June 30, 2025 based on the Company’s criteria. However, there can be no assurance that the allowance for credit losses will be adequate to cover significant losses, if any, which might be incurred in the future.

As of June 30, 2025, non-performing loans totaled $8,091,000 or 0.45% of total loans compared to $7,874,000, or 0.46%, of total loans at December 31, 2024. At June 30, 2025, non-performing assets totaled $8,091,000, or 0.34%, of total assets, compared to $7,874,000, or 0.34%, of total assets at December 31, 2024.

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The following table sets forth information regarding non-performing loans and foreclosed real estate at the dates indicated:

(dollars in thousands) June 30, 2025 December 31, 2024
Loans accounted for on a non-accrual basis:
Real Estate
Residential $ 982 $ 940
Commercial 5,710 5,743
Agricultural — —
Construction 50 —
Commercial loans 145 127
Other agricultural loans — —
Consumer loans to individuals 1,204 910
Total non-accrual loans 8,091 7,720
Accruing loans which are contractually
past due 90 days or more — 154
Total non-performing loans 8,091 7,874
Foreclosed real estate — —
Total non-performing assets $ 8,091 $ 7,874
Allowance for credit losses $ 20,908 $ 19,843
Coverage of non-performing loans 2.58 % 2.52 %
Non-performing loans to total loans 0.45 % 0.46 %
Non-performing loans to total assets 0.34 % 0.34 %
Non-performing assets to total assets 0.34 % 0.34 %

Deposits

During the six-months ended June 30, 2025, total deposits increased $138.7 million due primarily to an $69.9 million increase in interest-bearing demand deposits, a $50.6 million increase in certificates of deposit, and a $18.2 million increase in all other deposit categories, net.

The following table sets forth deposit balances as of the dates indicated:

(dollars in thousands) December 31, 2024
Non-interest bearing demand 406,358 $ 381,479
Interest-bearing demand 386,229 316,283
Money market deposit accounts 186,297 183,570
Savings 200,870 210,312
Time deposits <250,000 548,966 494,551
Time deposits >250,000 269,114 272,968
Total 1,997,834 $ 1,859,163

All values are in US Dollars.

Borrowings

Short-term borrowings were $26.5 at June 30, 2025, compared to $113.1 million at December 31, 2024, due primarily to a decrease in overnight borrowings.

Other borrowings as of June 30, 2025, were $85.4 million compared to $101.8 million as of December 31, 2024. Federal Reserve Bank borrowings decreased $20.0 million during six-months ended June 30, 2025, while Federal Home Loan Bank borrowings increased $3.6 million during the six-months ended June 30, 2025.

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Other borrowings consisted of the following:

(dollars in thousands) June 30, 2025 December 31, 2024
Notes with the FHLB:
Fixed rate borrowing due April 2025 at 4.26% $ — $ 20,000
Fixed rate borrowing due September 2025 at 4.52% 10,000 —
Amortizing fixed rate borrowing due September 2025 at 5.67% 656 1,941
Fixed rate borrowing due December 2025 at 4.44% 10,000 —
Fixed rate borrowing due March 2026 at 4.31% 10,000 —
Fixed rate borrowing due April 2026 at 4.04% 20,000 20,000
Amortizing fixed rate borrowing due May 2027 at 4.37% 15,032 18,751
Amortizing fixed rate borrowing due July 2028 at 4.70% 9,662 11,101
Fixed rate borrowing due July 2028 at 4.49% 10,000 10,000
$ 85,350 $ 81,793
Notes with the Federal Reserve Bank
Fixed rate borrowing due January 2025 at 4.76% — 20,000
$ — $ 20,000

Stockholders’ Equity and Capital Ratios

As of June 30, 2025, total stockholders’ equity was $225.4 million, compared to $213.5 million as of December 31, 2024. Total stockholders’ equity increased $12.0 million due to net income and $5.6 million due to an increase in the fair value of securities in the available-for-sale portfolio, offset partially by $5.7 million of dividends declared, net of tax. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

Regulatory Capital Requirements. The Federal Reserve has adopted regulatory capital rules pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the Bank Holding Company Act (“BHCA”). The Federal Reserve’s capital rules are similar to those imposed on the Bank by the FDIC. The Federal Reserve’s Small Bank Holding Company Policy Statement, however, exempts from the regulatory capital requirements bank holding companies with less than $3.0 billion in consolidated assets that are not engaged in significant non-banking or off-balance sheet activities and that do not have a material amount of debt or equity securities registered with the SEC. As long as their bank subsidiaries are well capitalized, such bank holding companies need only maintain a pro forma debt to equity ratio of less than 1.0 in order to pay dividends and repurchase stock and to be eligible for expedited treatment on applications.

A comparison of the Company’s consolidated regulatory capital ratios is as follows:

June 30, 2025 December 31, 2024
Tier 1 Capital
(To average assets) 9.41% 9.36%
Tier 1 Capital
(To risk-weighted assets) 12.13% 12.35%
Common Equity Tier 1 Capital
(To risk-weighted assets) 12.13% 12.35%
Total Capital
(To risk-weighted assets) 13.27% 13.45%

The Bank is required to comply with applicable capital adequacy rules adopted by the FDIC and other federal bank regulatory agencies (the “Basel III Capital Rules”). The Basel III Capital Rules apply to all depository institutions as well as to all top-tier bank and savings and loan holding companies that are not subject to the Federal Reserve Small Bank Holding Company Policy Statement.

Under the Basel III Capital Rules, banks are required to meet four minimum capital standards: (1) a “Tier 1” or “core” capital leverage ratio equal to at least 4% of total adjusted assets; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets. Common equity Tier 1 capital is defined as common stock instruments, retained earnings, any common equity Tier 1 minority interest and, unless the bank has made an “opt-out” election, accumulated other comprehensive income, net of goodwill and certain other intangible assets. Tier 1 or core capital is defined as common equity Tier 1 capital plus certain qualifying subordinated interests and

39

grandfathered capital instruments. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, qualifying subordinated instruments and certain grandfathered capital instruments. An institution’s risk-based capital requirements are measured against risk-weighted assets, which equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight. Risk weightings range from 0% for cash to 100% for property acquired through foreclosure, commercial loans, and certain other assets to 150% for exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property.

In addition to the above minimum requirements, the Basel III Capital Rules require banks and covered financial institution holding companies to maintain a capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based capital requirements. Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital buffer requirement effectively raises the minimum required risk-based capital ratios to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital on a fully phased-in basis. The Company and the Bank were in compliance with all applicable regulatory capital requirements as of June 30, 2025.

In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital. The Company adopted the transition guidance applied these effects to regulatory capital in the first quarter of 2023 upon adoption of CECL.

Liquidity

As of June 30, 2025, the Company had cash and cash equivalents of $53.0 million in the form of cash, due from banks and short-term deposits with other institutions. In addition, the Company had total securities available for sale of $402.5 million which could be used for liquidity needs. Total liquidity of $455.5 million as of June 30, 2025, represents 19.3% of total assets, compared to $470.1 million and 20.3% of total assets as of December 31, 2024. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of June 30, 2025 and December 31, 2024. Based upon these measures, the Company believes its liquidity is adequate.

Capital Resources

The Company has a line of credit commitment from Atlantic Community Bankers Bank for $7,000,000 which expires June 30, 2026. There were no borrowings under this line as of June 30, 2025 and December 31, 2024.

The Company has a line of credit commitment available which has no stated expiration date from PNC Bank for $10,000,000. There were no borrowings under this line as of June 30, 2025 and December 31, 2024.

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $661,776,000 as of June 30, 2025, of which $85,350,000 was outstanding in the form of borrowings as of June 30, 2025. As of December 31, 2024, the maximum borrowing capacity was $654,838,000, of which $15,525,000 of borrowings was outstanding as of December 31, 2024. Additionally, as of June 30, 2025, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $144,725,000 as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. As of December 31, 2024, there was $146,975,000 outstanding in the form of Letters of Credit. Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Non-GAAP Financial Measures

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures. Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (fte) and Net interest income (fte) is reconciled to GAAP interest income and net interest income on pages 42 and 46. Fully taxable equivalent interest income and net interest income is also reflected in the table on pages 43 and 47. Although the Company

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believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered as an alternative to GAAP measures.

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41

Results of Operations

NORWOOD FINANCIAL CORP

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis, Three Months Ended June 30,
dollars in thousands) 2025 2024
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(2) (1) (3) (2) (1) (3)
Assets
Interest-earning assets:
Interest-bearing deposits with banks $ 19,085 $ 220 4.62% $ 69,173 $ 967 5.62%
Securities available for sale:
Taxable 404,428 3,624 3.59 401,014 2,206 2.21
Tax-exempt (1) 44,158 312 2.83 69,126 477 2.78
Total securities available for sale (1) 448,586 3,936 3.52 470,140 2,683 2.30
Loans receivable (1) (4) (5) 1,783,626 27,249 6.13 1,629,283 24,220 5.98
Total interest-earning assets 2,251,297 31,405 5.60 2,168,596 27,870 5.17
Non-interest earning assets:
Cash and due from banks 30,323 26,422
Allowance for credit losses (20,733) (18,023)
Other assets 94,922 69,718
Total non-interest earning assets 104,512 78,117
Total Assets $ 2,355,809 $ 2,246,713
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand and money market $ 573,904 $ 2,887 2.02 $ 450,918 $ 2,397 2.14
Savings 204,318 119 0.23 233,676 286 0.49
Time 821,725 7,863 3.84 755,224 8,004 4.26
Total interest-bearing deposits 1,599,947 10,869 2.72 1,439,818 10,687 2.99
Short-term borrowings 17,757 211 4.77 61,689 356 2.32
Other borrowings 95,792 1,061 4.44 149,442 1,703 4.58
Total interest-bearing liabilities 1,713,496 12,141 2.84 1,650,949 12,746 3.11
Non-interest bearing liabilities:
Demand deposits 389,323 387,962
Other liabilities 29,639 28,308
Total non-interest bearing liabilities 418,962 416,270
Stockholders' equity 223,351 179,494
Total Liabilities and Stockholders' Equity $ 2,355,809 $ 2,246,713
Net interest income/spread (tax equivalent basis) 19,264 2.75% 15,124 2.06%
Tax-equivalent basis adjustment (199) (199)
Net interest income $ 19,065 $ 14,925
Net interest margin (tax equivalent basis) 3.43% 2.80%

(1)Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 21%.

(2)Average balances have been calculated based on daily balances.

(3)Annualized

(4)Loan balances include non-accrual loans and are net of unearned income.

(5)Loan yields include the effect of amortization of deferred fees, net of costs.

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42

Rate/Volume Analysis. The following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense. Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.

Increase/(Decrease)
Three months ended June 30, 2025 Compared to
Three months ended June 30, 2024
Variance due to
Volume Rate Net
(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks $ (690) $ (57) $ (747)
Securities available for sale:
Taxable 30 1,387 1,417
Tax-exempt securities (170) 6 (164)
Total securities (140) 1,393 1,253
Loans receivable 2,361 668 3,029
Total interest-earning assets 1,531 2,004 3,535
Interest-bearing liabilities:
Interest-bearing demand and money market 652 (163) 489
Savings (19) (148) (167)
Time 672 (812) (140)
Total interest-bearing deposits 1,305 (1,123) 182
Short-term borrowings (299) 154 (145)
Other borrowings (608) (34) (642)
Total interest-bearing liabilities 398 (1,003) (605)
Net interest income (tax-equivalent basis) $ 1,133 $ 3,007 $ 4,140

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43

Comparison of Operating Results for the Three Months Ended June 30, 2025 to June 30, 2024

General

For the three months ended June 30, 2025, net income totaled $6,205,000 compared to net income of $4,213,000 in the three months ended June 30, 2024. The increase in net income for the three months ended June 30, 2025, was due primarily to a $4,140,000 increase in net interest income, offset by a $603,000 increase in the provision for credit losses and a $651,000 increase in salaries and benefits. Earnings per share for the three-months ended June 30, 2025 were $0.67 per share for basic shares and fully diluted shares, compared to $0.52 per share for basic shares and for fully diluted shares for the three months ended June 30, 2024. The resulting annualized return on average assets and annualized return on average equity for the three months ended June 30, 2025 were 1.06% and 11.14%, respectively, compared to 0.75% and 9.44%, respectively, for the same period in 2024.

The following table sets forth changes in net income:

(dollars in thousands) Three months ended
June 30, 2025 to June 30, 2024
Net income three months ended June 30, 2024 $ 4,213
Change due to:
Net interest income 4,140
Provision for credit losses (603)
Net gains on sales of securities and loans 29
Service charges and fees 10
Earnings and proceeds on bank-owned life insurance 13
Other income (11)
Salaries and employee benefits (651)
Occupancy, furniture and equipment (120)
Data processing related (165)
Professional fees (115)
All other expenses (36)
Income tax expense (499)
Net income three months ended June 30, 2025 $ 6,205

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the three months ended June 30, 2025 totaled $19,264,000 which was $4,140,000 higher than the comparable period in 2024. The increase in net interest income was due primarily to a $3,535,000 increase in total interest income. The (fte) net interest spread and net interest margin were 2.75% and 3.43%, respectively, for the three months ended June 30, 2025 compared to 2.06% and 2.80%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” described above beginning on page 40.

For the three-months ended June 30, 2025, interest income (fte) totaled $31,405,000, with a yield on average earning assets of 5.60% compared to $27,870,000 and 5.17% for the three months ended June 30, 2024. Average loans increased $154,343,000 during the three-months ended June 30, 2025, over the comparable period of 2024, while average securities decreased $21,554,000 compared to the three months ended June 30, 2024. Average earning assets totaled $2.251 billion for the three months ended June 30, 2025, an increase of $82,701,000, over average earning assets for the same period in 2024. See “Non-GAAP Financial Measures” described above beginning on page 40.

Interest expense for the three months ended June 30, 2025 totaled $12,141,000, at an average cost of 2.84%, compared to $12,746,000, at an average cost of 3.11% for the same period in 2024. The decrease in interest expense during the three-months ended June 30, 2025 reflects the overall lower level of market interest rates. During the three months ended June 30, 2025, the average cost of time deposits, which is the most significant component of funding costs, decreased 42 basis points compared to the same three-month period of last year, while savings deposit costs decreased 26 basis points and short-term borrowing costs increased 245 basis points compared to the same three-month period of 2024.

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Provision for Credit Losses

The Company had a provision for credit losses of $950,000 during the three months ended June 30, 2025, compared to a provision for credit losses of $347,000 for the three months ended June 30, 2024. The Company makes provisions for, or releases of, credit loss expense in an amount necessary to maintain the allowance for credit losses at an acceptable level under the current expected credit loss methodology analysis. The Company recorded a net charge-off of $375,000 for the quarter ended June 30, 2025, compared to a net charge-off of $511,000 for the similar period in 2024. At June 30, 2025, the allowance for credit losses related to loans receivable was 1.17% of loans receivable. Additionally, at June 30, 2025, the allowance for credit losses related to loans receivable represented 258% of non-performing loans.

Other Income

Other income totaled $2,248,000 for the three months ended June 30, 2025, compared to $2,207,000 for the same period in 2024. The increase was due primarily to an increase in gains on sales of loans of $29,000. All other categories of other income increased $12,000, net, during the three months ended June 30, 2025.

Other Expense

Other expense for the three months ended June 30, 2025 totaled $12,531,000, which was $1,087,000 higher than the same period of 2024, due primarily to a $651,000 increase in salaries and employee benefits, a $165,000 increase in data processing and related operations, a $122,000 increase in foreclosed real estate expenses, and a $120,000 increase in occupancy, furniture and equipment. All other categories of other expense increased $29,000, net, during the three months ended June 30, 2025.

Income Tax Expense

Income tax expense totaled $1,627,000 for an effective tax rate of 20.8% for the three months ended June 30, 2025 compared to $1,128,000 for an effective tax rate of 21.1% for the three months ended June 30, 2024.

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Results of Operations

NORWOOD FINANCIAL CORP

Consolidated Average Balance Sheets with Resultant Interest and Rates

(Tax-Equivalent Basis, Six Months Ended June 30,
dollars in thousands) 2025 2024
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(2) (1) (3) (2) (1) (3)
Assets
Interest-earning assets:
Interest bearing deposits with banks $ 19,939 $ 446 4.51% $ 61,551 $ 1,697 5.54%
Securities available for sale:
Taxable 406,416 7,247 3.60 401,645 4,353 2.18
Tax-exempt (1) 44,199 626 2.86 69,503 958 2.77
Total securities available for sale (1) 450,615 7,873 3.52 471,148 5,311 2.27
Loans receivable (1) (4) (5) 1,763,710 53,369 6.10 1,620,694 47,994 5.96
Total interest-earning assets 2,234,264 61,688 5.57 2,153,393 55,002 5.14
Non-interest earning assets:
Cash and due from banks 29,519 25,508
Allowance for loan losses (20,445) (18,559)
Other assets 94,031 71,705
Total non-interest earning assets 103,105 78,654
Total Assets $ 2,337,369 $ 2,232,047
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand and money market $ 560,469 $ 5,688 2.05 $ 450,372 $ 4,707 2.10
Savings 208,090 261 0.25 234,611 536 0.46
Time 807,841 15,668 3.91 740,211 15,553 4.23
Total interest-bearing deposits 1,576,400 21,617 2.77 1,425,194 20,796 2.93
Short-term borrowings 30,954 669 4.36 59,843 692 2.33
Other borrowings 94,676 2,082 4.43 152,470 3,485 4.60
Total interest-bearing liabilities 1,702,030 24,368 2.89 1,637,507 24,973 3.07
Non-interest bearing liabilities:
Demand deposits 384,958 387,014
Other liabilities 29,594 26,735
Total non-interest bearing liabilities 414,552 413,749
Stockholders' equity 220,787 180,791
Total Liabilities and Stockholders' Equity $ 2,337,369 $ 2,232,047
Net interest income/spread (tax equivalent basis) 37,320 2.68% 30,029 2.07%
Tax-equivalent basis adjustment (397) (394)
Net interest income $ 36,923 $ 29,635
Net interest margin (tax equivalent basis) 3.37% 2.80%

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Rate/Volume Analysis. The following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense.

Increase/(Decrease)
Six months ended June 30, 2025 Compared to
Six months ended June 30, 2024
Variance due to
Volume Rate Net
(dollars in thousands)
Interest-earning assets:
Interest-bearing deposits with banks $ (1,128) $ (124) $ (1,252)
Securities available for sale:
Taxable 83 2,811 2,894
Tax-exempt securities (352) 20 (332)
Total securities (269) 2,831 2,562
Loans receivable 4,190 1,185 5,375
Total interest-earning assets 2,793 3,892 6,685
Interest-bearing liabilities:
Interest-bearing demand and money market 1,120 (139) 981
Savings (36) (239) (275)
Time 1,354 (1,239) 115
Total interest-bearing deposits 2,438 (1,617) 821
Short-term borrowings (432) 409 (23)
Other borrowings (1,320) (84) (1,404)
Total interest-bearing liabilities 686 (1,292) (606)
Net interest income (tax-equivalent basis) $ 2,107 $ 5,184 $ 7,291

Comparison of Operating Results for the Six Months Ended June 30, 2025 to June 30, 2024

General

For the six months ended June 30, 2025, net income totaled $11,978,000 compared to net income of $8,646,000 in the six months ended June 30, 2024. The increase in net income for the six months ended June 30, 2025 was due primarily to a $7,288,000 increase in net interest income, offset by a $2,083,000 increase in the provision for credit losses, a $987,000 increase in salaries and benefits, and an increase of $839,000 in income tax expense. Earnings per share for the six-months ended June 30, 2025 were $1.30 per share for basic shares and fully diluted shares, compared to $1.07 per share for basic shares and fully diluted shares for the six months ended June 30, 2024. The resulting annualized return on average assets and annualized return on average equity for the six months ended June 30, 2025 were 1.03% and 10.94%, respectively, compared to 0.78% and 9.62%, respectively, for the same period in 2024.

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The following table sets forth changes in net income:

(dollars in thousands) Six months ended
June 30, 2025 to June 30, 2024
Net income six months ended June 30, 2024 $ 8,646
Change due to:
Net interest income 7,288
Provision for credit losses (2,083)
Service charges and fees 180
Net gains on sales of securities and loans 70
Earnings and proceeds on bank-owned life insurance 32
Other income 104
Salaries and employee benefits (987)
Occupancy, furniture and equipment (238)
Data processing related (228)
Professional fees (190)
All other expenses 223
Income tax expense (839)
Net income six months ended June 30, 2025 $ 11,978

Net Interest Income

Net interest income on a fully taxable equivalent basis (fte) for the six months ended June 30, 2025 totaled $37,320,000 which was $7,291,000 higher than the comparable period in 2024. The increase in net interest income was due primarily to a $6,686,000 increase in total interest income. The (fte) net interest spread and net interest margin were 2.68% and 3.37%, respectively, for the six months ended June 30, 2025 compared to 2.07% and 2.80%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” described above beginning on page 40.

For the six-months ended June 30, 2025, interest income (fte) totaled $61,688,000, with a yield on average earning assets of 5.57% compared to $55,002,000 and 5.14% for the six months ended June 30, 2024. Average loans increased $143,016,000 million during the six-months ended June 30, 2025, over the comparable period of 2024, while average securities decreased $20,533,000 million compared to the six months ended June 30, 2024. Average earning assets totaled $2.234 billion for the six months ended June 30, 2025, an increase of $80,871,000 million, over average earning assets for the same period in 2024. See “Non-GAAP Financial Measures” described above beginning on page 40.

Interest expense for the six months ended June 30, 2025, totaled $24,368,000, at an average cost of 2.89%, compared to $24,973,000, at an average cost of 3.07% for the same period in 2024. The decrease in interest expense during the six-months ended June 30, 2025 reflects the overall lower level of market interest rates. During the six months ended June 30, 2025, the average cost of time deposits, which is the most significant component of funding costs, decreased 32 basis points compared to the same six-month period of last year, while short-term borrowing costs increased 203 basis points and other borrowing costs decreased 17 basis points compared to the same six-month period of 2024.

Provision for Credit Losses

The Company had a provision for credit loss expense of $1,807,000 during the six months ended June 30, 2025, compared to a release of provision for credit loss expense of $276,000 for the six months ended June 30, 2024. The Company makes provisions for, or releases of credit loss expense in an amount necessary to maintain the allowance for credit losses at an acceptable level under the current expected credit loss methodology analysis. The Company had net charge-offs for the six months ended June 30, 2025, of $699,000, compared to $834,000 in the corresponding period in 2024. At June 30, 2025, the allowance for credit losses related to loans receivable was 1.17% of loans receivable. Additionally, at June 30, 2025, the allowance for credit losses related to loans receivable represented 258% of non-performing loans.

Other Income

Other income totaled 4,599,000 for the six months ended June 30, 2025, compared to $4,213,000 for the same period in 2024. The increase was due primarily to an increased level of service charges and fees of $180,000. All other categories of other income increased $206,000, net, during the six months ended June 30, 2025.

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Other Expense

Other expense for the six months ended June 30, 2025 totaled $24,595,000, which was $1,420,000 or 6.1%, higher than the same period of 2024, due primarily to a $987,000 increase in salaries and employee benefits, a $190,000 increase in professional fees, a $238,000 increase in occupancy, furniture and equipment, and a $228,000 increase in data processing expenses. All other categories of other expense decreased $223,000, net, during the six months ended June 30, 2025.

Income Tax Expense

Income tax expense totaled $3,142,000 for an effective tax rate of 20.8% for the six months ended June 30, 2025 compared to $2,303,000 for an effective tax rate of 21.0% for the six months ended June 30, 2024.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management

Management considers interest rate risk to be our most significant market risk. Market risk is the risk of loss from adverse changes in market prices and rates. Interest rate risk is the exposure to adverse changes in our net income as a result of changes in interest rates.

Our primary earnings source is net interest income, which is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits and liabilities, and the credit quality of earning assets. Our asset and liability management objectives are to maintain a strong, stable net interest margin, to utilize our capital effectively without taking undue risks, to maintain adequate liquidity, and to reduce vulnerability of our operations to changes in interest rates.

Our Asset and Liability Committee evaluates periodically, but at least four times a year, the impact of changes in market interest rates on assets and liabilities, net interest margin, capital and liquidity. Risk assessments are governed by policies and limits established by senior management, which are reviewed and approved by the full Board of Directors at least annually. The economic environment continually presents uncertainties as to future interest rate trends. The Asset and Liability Committee regularly utilizes a model that projects net interest income based on increasing or decreasing interest rates, in order to be better able to respond to changes in interest rates.

Changes in interest rates affect the value of our interest-earning assets and, in particular, our securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. Increases in interest rates could result in decreases in the market value of interest-earning assets, which could adversely affect our stockholders' equity and results of operations if sold. We are also subject to reinvestment risk associated with changes in interest rates. Changes in market interest rates also could affect the type (fixed-rate or adjustable-rate) and amount of loans we originate and the average life of loans and securities, which can impact the yields earned on our loans and securities. In periods of decreasing interest rates, the average life of loans and securities we hold may be shortened to the extent increased prepayment activity occurs during such periods which, in turn, may result in the investment of funds from such prepayments in lower yielding assets. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may result in decreasing loan prepayments with respect to fixed rate loans (and therefore an increase in the average life of such loans), may result in a decrease in loan demand, and may make it more difficult for borrowers to repay adjustable rate loans.

We utilize the results of a detailed and dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. Management routinely monitors simulated net interest income sensitivity over a rolling two-year horizon. The simulation model captures the impact of changing interest rates on the interest income received and the interest expense paid on all assets and liabilities reflected on our consolidated balance sheet. This sensitivity analysis is compared to the asset and liability policy limits that specify a maximum tolerance level for net interest income exposure over a one-year horizon given 100 through 300-basis point upward and 100 through 200 downward shifts in interest rates. A parallel and pro-rata shift in rates over a twelve-month period is assumed.

In addition to the above scenarios, we consider other non-parallel rate shifts that would also exert pressure on earnings. During the three months ended June 30, 2025, the U.S. Treasury yield curve has inverted slightly. For the first six months of 2025, the yield on U.S. Treasury 5-year notes decreased 59 basis points from 4.38% to 3.79%, while the yield on 3-month Treasury bills increased 4 basis points from 4.37% to 4.41%. The 3-month/5-year Treasury spread decreased from a positive 1 basis point at December 31, 2024 to a negative 62 basis points at June 30, 2025. A continued flattening or inversion in the yield curve may adversely affect net interest income as reinvestment of cash flows may be at lower rates. However, there is no certainty on the direction of interest rates. The Federal Reserve Open Market Committee has indicated that it will take a measured stance toward further lowering short-term rates.

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The following reflects our net interest income sensitivity analysis at June 30, 2025 and December 31, 2024:

June 30, 2025
Potential Change
in Future Net
Changes in Interest Interest Income
Rates in Basis Points Year 1 Year 2
(Dollars in thousands) $ Change % Change $ Change % Change
+300 (3,421) -3.8% (2,008) -2.0%
+200 (2,155) -2.4% (994) -1.0%
+100 (980) -1.1% (268) -0.3%
Static - 0.0% - 0.0%
(100) 405 0.5% (1,310) -1.3%
(200) (997) -1.1% (6,415) -6.5%
December 31, 2024
Potential Change
in Future Net
Changes in Interest Interest Income
Rates in Basis Points Year 1 Year 2
(Dollars in thousands) $ Change % Change $ Change % Change
+300 (6,364) -7.9% (4,164) -4.5%
+200 (4,131) -5.1% (2,500) -2.7%
+100 (1,963) -2.4% (1,043) -1.1%
Static - 0.0% - 0.0%
(100) 1,438 1.8% (380) -0.4%
(200) 1,441 1.8% (4,472) -4.8%

As noted in the table above, a 200-basis point increase in interest rates is projected to decrease net interest income by 2.4% in year 1 and decrease net interest income by 1.0% in year 2. Our balance sheet sensitivity to such a move in interest rates at June 30, 2025 decreased as compared to December 31, 2024 (which was a decrease of 5.1% in net interest income over a twelve-month period). This decrease in sensitivity is the result of a decrease in the balance of borrowed funds over the six month period.  Overall, our strategy has been to proactively take advantage of the drop in short-term by aggressively lowering deposit and borrowing costs, ultimately dampening the effect of variable and adjustable-rate loan repricing and additional fixed rate loan refinancing. Over the intervening year, the effective duration (a measure of price sensitivity to interest rates) of the bond portfolio declined to 5.1 Years at June 30, 2025 from 5.60 at December 31, 2024.

The preceding sensitivity analysis does not represent a Company forecast and should not be relied on as being indicative of expected operating results. These hypothetical estimates are based on numerous assumptions including, but not limited to, the nature and timing of interest rate levels and yield curve shapes, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment and replacement of asset and liability cash flows. While assumptions are developed based on perceived current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences may change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to prepayment and refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals, prepayment penalties and product preference changes and other internal and external variables. Furthermore, the sensitivity analysis does not reflect actions that management might take in responding to, or anticipating, changes in interest rates and market conditions.

‎

51

Item 4. Controls and Procedures

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (the “Commission”) rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

‎

52

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

On February 20, 2024, the Company was notified of a Complaint (the “Complaint”) entitled Ian Werkmeister vs. Wayne Bank, filed on February 12, 2024 in the United States District Court for the Middle District of Pennsylvania seeking class action status. The Plaintiff is seeking monetary recovery and other relief on behalf of themselves and one or more putative classes of other individuals similarly situated. The Complaint arises out of a widely reported data security incident involving MOVEit, a file sharing software used globally by government agencies, enterprise corporations, and financial institutions. In October of 2023, Wayne Bank was notified by its third-party information service provider of a cyber-incident that involved unauthorized access to Wayne Bank customer information in one of the vendor’s file transfer applications. The incident involved vulnerabilities discovered in MOVEit Transfer, a file transfer software used by the Bank’s vendor to support services provided by the vendor to Wayne Bank and its related institutions. MOVEit is a commonly used secure Managed File Transfer software, which supports file transfer activities used by thousands of organizations around the world, including government agencies and major financial firms. The vulnerability discovered in MOVEit did not involve any of Wayne Bank’s internal systems and did not impact the Bank’s ability to service its customers.

The MOVEit cases have since been transferred and consolidated in the United States District Court for the District of Massachusetts (the “Court”) and are now entitled MOVEit Customer Data Security Breach Litigation. On July 23, 2024, on behalf of all of the Defendants (including the Company) in this case, an omnibus Motion to Dismiss the cases for lack of Article III standing pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure was filed with the Court. A hearing on this motion was held on October 9, 2024. On December 12, 2024, Judge Burroughs denied the defendants’ Rule 12(b)(1) motion in large part. The Court has ordered that a bellwether process be used to test claims and defenses. Because Wayne Bank is not a bellwether defendant, its obligations will be much lessened but will include, among other things, modest discovery.

The Company believes it has meritorious defenses to the claims asserted in the Complaint and intends to vigorously defend itself against such Complaint. While we continue to measure the impact of this cyber-incident, including certain remediation expenses and other potential liabilities, we do not currently believe this incident will have a material adverse effect on our business, operations, or financial results.

Other than the foregoing, neither the Company nor its subsidiaries are involved in any other pending legal proceedings, other than routine legal matters occurring in the ordinary course of business, which in the aggregate involve amounts which are believed by management to be immaterial to the consolidated financial condition or results of operations of the Company.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Sales and Use of Proceeds

(a)    Unregistered Sales of Equity Securities. Not Applicable.

(b)    Use of Proceeds. Not Applicable

(c)    Issuer Purchases of Equity Securities. Set forth below is information regarding the Company’s stock repurchases during the quarter ended June 30, 2025.

Issuer Purchases of Equity Securities
Maximum Number
Total Number of (or Approximate
Total Shares (or Units) Dollar Value) of Shares
Number Average Purchased as Part of (or Units)
of Shares Price Paid Publicly that May Yet Be
(or Units) Per Share Announced Plans Purchased Under the
Purchased (or Unit) or Programs * Plans or Programs
April 1 – 30, 2025 - $ - - 244,234
May 1 – 31, 2025 - - - 244,234
June 1 – 30, 2025 - - - 244,234
Total - $ - - 244,234

53

*On March 30, 2021, the Company announced a share repurchase program for up to approximately 5% of the Company’s outstanding shares of common stock, or approximately 400,000 shares, in the open market, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.  On March 19, 2008, the Company announced its intention to repurchase up to 5% of its outstanding common stock (approximately 226,050 split-adjusted shares) in the open market. On November 10, 2011, the Company announced that it had increased the number of shares which may be repurchased under its open-market program to 5% of its currently outstanding shares, or approximately 270,600 split-adjusted shares. Both share repurchase programs are currently in effect.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

‎

54

Item 6. Exhibits

No. Description
3(i) Amended and Restated Articles of Incorporation of Norwood Financial Corp^(1)^
3(ii) Bylaws of Norwood Financial Corp^(2)^
4.0 Specimen Stock Certificate of Norwood Financial Corp^(3)^
31.1 Rule 13a-14(a)/15d-14(a) Certification of CEO
31.2 Rule 13a-14(a)/15d-14(a) Certification of CFO
32 Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of Sarbanes Oxley Act of 2002
101 The following materials from the Company’s Form 10-Q for the quarter ended June 30, 2025, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Changes in Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.
101.INS Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)Incorporated by reference into this document from Exhibit 3(i) to the Company’s Form 10-K filed with the Commission on March 13, 2020.

(2)Incorporated by reference from Exhibit 3(ii) to the Company’s Annual Report on Form 10-K filed with the Commission on March 14, 2024.

(3)Incorporated herein by reference into this document from the identically numbered Exhibits to the Company’s Form 10, Registration Statement initially filed in paper with the Commission on April 29, 1996, Registration No. 0-28364.

55

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NORWOOD FINANCIAL CORP
Date: August 8, 2025 By: /s/ James O. Donnelly
James O. Donnelly
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 8, 2025 /s/ John M. McCaffery
John M. McCaffery
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

56

		Exhibit 311

Exhibit 31.1

CERTIFICATION

I, James O. Donnelly, certify that:



1.I have reviewed this quarterly report on Form 10-Q of Norwood Financial Corp;



2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 |  | | | --- | --- | | Date: August 8, 2025 | /s/ James O. Donnelly | |  | James O. Donnelly | |  | President and Chief Executive Officer | 

		Exhibit 312

Exhibit 31.2

CERTIFICATION



I, John M.  McCaffery, certify that:



1.I have reviewed this quarterly report on Form 10-Q of Norwood Financial Corp;



2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 |  | | | --- | --- | | Date: August 8, 2025 | /s/ John M.  McCaffery | |  | John M.  McCaffery | |  | Executive Vice President and Chief Financial Officer | 

		Exhibit 32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Norwood Financial Corp (the Company) on Form 10-Q for the period ending June  30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, James O. Donnelly, President and Chief Executive Officer, and John M.  McCaffery, Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 |  | | | --- | --- | | /s/ James O. Donnelly | /s/ John M.  McCaffery | | James O. Donnelly | John M.  McCaffery | | President and Chief Executive Officer | Executive Vice President and Chief Financial Officer | |  | | | August 8, 2025 | | 

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